The Rise and Fall of Udaan 🦄

Hey there,

Remember Udaan, the B2B e-commerce platform that took the startup world by storm?

Well, they're in the headlines again, but not for the reasons you might expect. Let's dive in.

First, some quick background:

In 2016, Udaan was founded by three ex-Flipkart executives. Their aim was simple: streamline the chaotic B2B e-commerce space. And they achieved impressive milestones:

- 3 million users and 30,000 sellers
- Presence in 900+ cities covering 12,000+ pin codes
- 4.5 million transactions every month

But, as they say, every high has its low.

After a strong start, Udaan is now facing some significant challenges:

1. Revenue and GMV Drop: 

Udaan's parent company, Trustroot Internet, saw a 43% decrease in revenue, reporting Rs 5,629 crore for FY23.

After reaching a high of about $4 billion in GMV post-pandemic, the company's current annual GMV is estimated to be between $1.0-$1.5 billion.

2. Equity Funding Gap: 

Udaan secured $280 million in a Series D round in Jan 2021. And due to startup funding winter had to shift its focus to debt and convertible notes, accumulating over $350 million since.

Now, Managing and repaying this debt requires individual focus.

3. Leadership and Employees leaving: In 2022, around 50 top executives, from C-suite to business heads, left Udaan.

Additionally, the company let go of about 500 employees. While Udaan says this was for "efficiency enhancement," it does highlight concerns about its financial stability.

A Glimpse into the Future:

After not raising funds for 30 months, Udaan is now looking for more capital. However, potential investors are considering a significant cut in its valuation. Dropping from $3.2 billion to possibly under $1.5 billion is a big setback for any big company.

Udaan's shift from a leading unicorn to facing these challenges shows the unpredictable world of startups. It emphasizes the need for steady growth and wise financial decisions.

With such significant shifts in valuation and revenue, it makes us wonder: Is Udaan's situation a unique case, or a sign of larger challenges looming in the startup ecosystem?

Many companies, in their quest for rapid growth, spent heavily. Those unable to secure new funding will face challenges. They'll need to become profitable, adapt, or risk raising funds at a reduced valuation.

✍️ Jargon of the day

Downround - A fundraising round where a company raises capital at a lower valuation than in its previous round.

Downrounds can indicate various challenges, such as slowed growth or external market factors, and often lead to the dilution of ownership for existing shareholders.

In Udaan's context, the potential decrease in valuation during its next fundraising could be considered a downround if it materializes.

Loved this edition? Or have some thoughts to share? We'd love to hear from you

Cheers,
Karthik